View from the Arch #9

2023-in-Review across crypto, traditional finance and tech

December 29, 2023

We thought it fitting to do a special edition given it’s the end of a fantastic 2023. We’re going to give a quick year in review and our predictions for 2024 across Crypto, Legacy, and Tech markets.

Remember, this is categorically not investment advice - please don’t sue us.

This Year in Crypto

Below is a selection of asset performance YTD:

The SPX, the S&P 500 market index, was up 25% this year - did you outperform? The average annualized return since adopting 500 stocks into the index from 1957 through Dec 31, 2022 is 10.31%, so this year was certainly a good year. If you were long Gold (+13%) or sitting in cash (US dollar index - 2.46%), you’ve been left behind.

Similar to the SPX, BTC (+167%) is the “index” or benchmark for crypto. 167% is good, but not out of the ordinary for Bitcoin. Obviously there is less price history here and the asset is more volatile, but it is becoming decreasingly so over time. Public crypto stocks offered great Bitcoin beta; who knows if this will continue. Marathon Digital +813% (Bitcoin miner), Coinbase +451% (crypto exchange), and Microstrategy +362% (Michael Saylor’s company) all outperformed Bitcoin to the upside and downside.

Altcoins are high risk, high reward. Your picks must be good for this to be worthwhile, otherwise you are better off sitting in BTC. Solana (+967%) has been a killer trade. There was opportunity in the wake of FTX/Alameda - at the time, it was a contrarian trade. Chainlink (+197%) has performed almost the same as Bitcoin, but had periods of significant underperformance and drawdown. Ethereum (+97%) and Ripple (+87%), like many other alts, underperformed Bitcoin. Only 3 DeFi tokens (MKR, SND, LD), which were popular in 2020 and 2021, outperformed Bitcoin and they did so with significantly more volatility.

Other notable events to highlight throughout the year include:

Predictions for 2024

  1. BTC and ETH ETFs both get approved

  2. SOLETH hits 0.1 (Currently 0.05)

  3. Coinbase posts a record quarterly revenue of >$2.5bn (Currently ~$600m)

  4. We see two more meme coins hit a market-cap of >$10bn (Currently only $Doge)

  5. Two more nation states adopt Bitcoin as legal tender and/or buy Bitcoin

This Year in TradFi

Rates continually increased throughout the year, which led to a banking sector meltdown and an increase in investor allocation towards bonds and private credit. AI advances helped rally the market as we saw the S&P steadily march upwards with incredibly strong performance, much of which was driven by the Magnificent Seven - Amazon, Apple, Alphabet, Nvidia, Meta, Microsoft, and Tesla. Real estate had a depressed year. For residential real estate, 2023 was the least affordable year for home buying on record, stemming from historic mortgage rates. Commercial real estate struggled hard as the future of office buildings remains up in the air, with corporations downsizing and shifting towards remote work. And all of this came with the backdrop of increasing geopolitical issues with the Ukraine-Russia war and the Israel-Hamas war, which added additional uncertainty and tail risks to the market.

However, the final two months of 2023 saved a lot of performance. And it's the expectation that we're at the top of the rates cycle that saw cash flow back into risk assets. Not that the incoming cash was chasing the US/other economic recovery, but the next leg of the rates cycle with the Fed pencilled in for perhaps as many as four 25bp cuts in 2024. Equities rallied hard, which saw the Dow at record highs and the S&P (as at the time of writing) just a fraction away from recording the same feat. The everything rally boosted gold, crypto, and Bitcoin as US Treasury yields plummeted. The 30-year was yielding below 4% having reversed direction from over 5% as late as October.

The smoke signals for the outlook of the US economy, and global one for that matter, suggest an uncertain picture. As mentioned, that's not why markets are rallying, or in our view, why we are anticipating a rally for at least the first part of 2024. Not forgetting it is a US election year and policy decisions will (likely) be made to keep the rally intact.

Other notable events to highlight throughout the year include:

Predictions for 2024

  1. S&P crosses the $5,100 mark

  2. FED cuts rates by 1%

  3. US avoids a recession in 2024

  4. The IPO window will open up and SPACs will return with a more aligned incentive structure / no promotes

  5. Gold continues to surge, breaking the $2,200 mark

This Year in Tech

This year had a lot of volatility as investors and startups alike adjusted to compressed valuations and an emphasis on profitability. We started the year with instability in the banking sector across Silicon Valley Bank, First Republic Bank, and numerous regional banks. Fintech companies also got hit hard as interest rates increased, suppressing consumer/commercial borrowing demand and increasing cost of capital.

OpenAI then came in and single-handedly put the tech ecosystem on its shoulders with the launch of GPT4 at the beginning of 2023, right on the heels of ChatGPT at the end of 2022. This resulted in a mania of new AI startups as well as billions of dollars of investments into these companies from VCs and corporations (Microsoft, Nvida, Google, Amazon, Meta, and more) alike. While VCs poured money into AI, venture got hit the hardest at the growth stage with heaps of over-valued companies, resulting in mass layoffs across the board.

Ozempic (GLP-1) went mainstream and gained much attention, creating a frenzy in healthcare, a boost in Hot Cheeto sales, and a tailwind to digital health startups. And lastly, TikTok released TikTok Shop in the US, marking its expansion beyond social media and into e-commerce.

Other notable events to highlight throughout the year include:

  • SVB and FRB both had bank-runs and got acquired

  • OpenAI launched GPT-4

  • Stripe, the tech darling, raised a down-round which decreased the valuation of the company from $95B to $50B

  • Select few IPOs occurred with Cava (fast casual restaurant chain) and Klaviyo (marketing automation platform)

  • Tech unicorns Olive and Convoy shut down

  • Adobe terminated its $20B acquisition of Figma due to regulatory hurdles

Predictions for 2024

  1. Stripe, Databricks, or Chime file to go public

  2. Mistral AI / LLaMA release an open-source model on par with GPT-4

  3. A 50/50 weighted basket of MSFT and NVDIA continues to outperform the S&P

  4. TikTok gets banned in a G7 country

  5. At least one high profile ($100M+ raised) AI company shuts down

Disclaimer: None of the above is financial advice, seriously.